A Reddit post is going viral after raising concerns regarding the mis-selling of policies by banks. The post was shared in the ‘personal finance community', where a man revealed that his mother was nearly tricked into buying a unit-linked insurance plan (ULIP).
“My mother recently went to her home bank branch to do a KYC update and renew an old FD. Since I happened to be free, I tagged along. Out of nowhere, the branch manager invited us into his office, offered tea and started pitching a " high-yield savings plan" reserved strictly for senior citizens that promised 11-12% tax-free returns,” the post read.
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The post added that the manager was hesitant to share the product brochure, but eventually they discovered that he was trying to sell them a ULIP with a 10-year lock-in and Rs 1.5 lakh annual premium.
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Went with my mother to update her Savings Account KYC. The Bank Manager almost tricked us into a 10-year lock-in product. How do we protect our non-tech parents?
by u/markhab_Insect_4727 in personalfinanceindia
The post further stated how concerning it was that banks are targeting vulnerable senior citizens with such products, and there are very few safeguards.
“It was an eye-opener regarding how banks target elderly people who naturally trust branch managers. How do you protect your parents from these commission-driven traps….,” the post read, seeking suggestions on next steps.
What To Do In Such Situations:
Unit Linked Insurance Plans (ULIPs) are designed to serve two goals in a single product: investment and insurance. Most of your contributions go towards investments into stocks, bonds and mutual funds, and you also get a life cover.
ULIPs also face widespread criticism as a significant part of your returns are eaten up due to commissions involved in such policies. As a result, many people advocate against such plans, arguing that more cost-efficient options like direct mutual fund investments and separate term life insurance plans already exist.
In most ULIPs, one needs to contribute a set premium in the first five years, while the policy matures after 10 years. In case you or your parents were tricked into buying such a policy, here are some things you can do next:
- Free-look period: The free-look period gives you an opportunity to cancel an insurance policy if you realise that it is unsuitable or was mis-sold. Generally, insurers provide a 15 to 30-day free-look period from the date of receiving the policy document.
- Escalate to the bank or insurance company's grievance redressal cell: If the policy was sold through misleading promises, incomplete information or misrepresentation, you can file a formal complaint. You should make sure to attach policy documents, sales messages, emails and other supporting evidence to receive resolution faster.
- You can file a complaint against the insurer through the Council for Insurance Ombudsmen portal. It is designed to help you resolve disputes over mis-selling, service quality, etc.
- Talk to your parents: Financial literacy is an important topic for everyone. You should frequently discuss such issues with your parents to ensure that they remain aware about common financial scams, mis-selling practices and misleading investment schemes.
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